Oregon Forges Ahead With Payroll-Deduction IRA Program Despite Adverse Congressional Action
Author: Rena Pirsos, XpertHR Legal Editor
May 10, 2017
Despite the Congressional joint resolution that nullifies the Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) rule regarding state auto-enrollment IRAs, the Oregon State Treasury will proceed with its plan to roll out its OregonSaves pilot program on July 1. The Oregon Retirement Savings Board adopted final rules to implement the program.
Commenting on Congress's action, Oregon Treasurer Tobias Read said in a press release that, "In Oregon, OregonSaves will continue to move forward with our pilot program that is launching on July 1 this year. The need to address the oncoming retirement crisis is too great. This action will not halt our commitment to working Oregonians."
OregonSaves is a retirement savings program that requires private employers that do not offer retirement plans to automatically enroll their employees in Roth individual retirement accounts (IRAs) and make deductions from their pay to fund the program. The pilot will include a small group of employers. When the pilot ends, the program is expected to be phased in starting in 2018.
The following registration dates will apply to employers that have:
- 100 or more employees - by November 15, 2017;
- At least 50 employees - by May 15, 2018;
- At least 20 employees - by December 15, 2018;
- At least 10 employees - by May 15, 2019;
- At least five employees - by November 15, 2019; and
- At least four employees - by May 15, 2020.
Registrations will be valid for three years.
All employers will be required to certify whether they offer tax-qualified retirement plans to their employees. Employers that do not offer such retirement plans will be required to enroll in OregonSaves. Within 60 days after an employer's enrollment deadline, the employer will have to provide employee data to the state to set up employees' accounts.
Employers that offer their own tax-qualified retirement plans are not entirely off the hook, however. These employers are still required to register and participate in OregonSaves for employees who are not eligible for the retirement plan the employer otherwise offers (e.g., part-time employees).
On the other hand, employees who earn more than the income limits for Roth IRAs (i.e., in 2017, $133,000 for unmarried taxpayers and $196,000 for married taxpayers) will not be eligible to participate. All employees will have the option to opt out of the program.
Fate of Other States' Plans
Other states that have enacted auto-enrollment IRA legislation include California, Connecticut, Illinois and Maryland, and a number of other states and municipalities are considering similar plans. The EBSA rule created a safe harbor status for these plans, which would otherwise be subject to ERISA. The Congressional joint resolution disapproved that safe harbor and President Trump is expected to sign the resolution into law. At that point, the fate of these state programs will be unclear without further action from the individual states.